Exam 8: Behavioral Economics

In the financial crisis that precipitated the 2007-2009 recession, people systematically overestimated their prospects for financial gain. Which branch of economics would most likely have expected to predict this?

Which of the following facts is not a basis for prospect theory in behavioral economics?

Credit card companies require low minimum payments that impose significant interest costs on consumers choosing to pay the minimum. Recent legislation has required credit card companies to show on customer billing statements how much interest would be paid and how long it would take to repay the current balance if only the minimum is paid. Behavioral economists would expect this legislation to

According to behavioral economics research, in which of the following cases would we expect a person to experience no net change in their utility?

The status quo effect suggests that giving people more options is always good for them.

Use the status quo bias to explain why people are more likely to "super-size" their meal when asked than when not offered.

How do framing effects influence perceptions of gains or losses? Give an example based on a wage increase of 7 percent for a worker and a wage increase of 11 percent for coworkers.

What are the four major complaints behavioral economists have with the neoclassical assumptions?

Which of the following statements about the so-called "hedonic treadmill" is not true?

Placement of goods in grocery and other retail stores is often done with the objective of encouraging impulse buying.

Adam and Brittany both recently started new jobs. Both have determined that they should save 10 percent of their monthly income toward retirement. Adam's employer has no program established for payroll deduction, but he could easily set up automatic withdrawals to go into a retirement fund. Brittany's employer automatically directs 8 percent of the paycheck into a retirement fund, but the employee can change the percentage deducted. Behavioral economists would expect

"Time inconsistency" refers to the

The tendency of people to overestimate the value of their possessions when, say, considering such value for insurance purposes is known in prospect theory as the

Behavioral economists believe that while people try to make rational decisions, they are frequently subject to systematic errors.

Suppose Justine and Sarah are playing the dictator game. Justine is the dictator and has $100 to allocate. Based on repeated experiments of the dictator game, what amounts, on average, are Justine and Sarah most likely to receive?

Neoclassical economics assumes that people have the following characteristics, except

Kara was earning $40,000 per year. When her income rose to $60,000 per year, she enjoyed the higher level of consumption for a while, but eventually she was no more happy than when she earned $40,000 (assume prices didn't change over this time period). Economist Richard Easterlin described this as

Which of the following is a significant difference in the outcomes between the dictator game and the ultimatum game?

Which of the following does not illustrate the use of heuristics?

The availability heuristic refers to people purchasing what is most easily accessible.